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The 20 Most influential finance blogs

“Most investors would acknowledge that social media is playing an increasing role in their investment decisions,” observes the UK Web site Mindful Money. “Yet no-one has mapped the emerging network of influence likely to be playing a crucial part in those decisions.” Until now.
The presentation below provides a fascinating map of financial media influencers. The MindfulMoney top 20 should come as no surprise. You probably visit them daily, or at least discuss ideas they have unearthed long before the mainstream media stumbles onto them.
Here are the top 20, with links, followed by the presentation. Congratulations to all listed:

1. Naked Capitalism
2. Infectious Greed
3. The Big Picture
4. Jesse’s Cross Roads Cafe
5. Zerohedge
6. Mish’s global Economic Analysis
7. Calculated Risk
8. Paul Krugman’s Blog
9. FT Alphaville
10. Ludwig von Mises Institute
11. The Market Trader
12. WSJ Blogs
13. The Epicurean Dealmaker
14.Credit Writedowns
15. Dealbreaker
16. China Financial Markets
17. Max Keiser
18. The Angry Bear
19. The Economist
20. Jr. Deputy Accountant

There are several thoughts that occur to me regarding this list,

but the first is that readers and those who comment make a difference…people bring information and insights that go far beyond slogans of the moment or passions of the day, although those are are part of the deal. This is true for each blog but also from my experience readers usually have at least several blogs on their lists, and often are not organized simply by political economic approach as the first criterion. One can read NC or Economist’s View as well as Mish.

These blogs are data driven in various ways and often contain many links that allow easy access to data, original materials, or documents so people may check accuracy of the post. In looking for new writers for AB this is one criterion that is mandatory overall, and even decent writers of blogs with strong opinions often omit links to such data or docs, which is unsatisfactory but average for writing. The extra care for targeted audiences pays off.

Most are dominated or driven by a person with a strong presentation style and implied forceful personality who spends a lot of time gathering information and is part of the industry. Angry Bear is a multi-authored blog that has more of a magazine format than most.

Another recent list ranked 20 top financial blogs includes AB and is based on pageviews, but the notion they added appears to have a definition of finance that includes advice to investors.

Anyway, our readers and commenters deserve the credit in addition to the contributors. Thanks all. Dan

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Foreclosures and key to economic upturn??

If you have the stomach for it and want to learn more about the gory details about the policy side of all this, there are a bunch of good writers you can turn to, including Yves Smith, David Dayen, and Marcy Wheeler, all of whom have put up great pieces worth looking at in the last couple of days. Numerian has a great post I have already linked to a couple times in past pieces this week on the truly scary implications of what is going down.

via Alternet

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Internal Devaluation ?!?

Beginner’s question:
I was reading Krugman’s long article on how the Euro allowed weak countries to borrow on the same easy terms as strong countries — leading to the usual (e.g., Irish) bankers lending excess monies to people who can’t pay back. The usual cure — if a country has its own currency — is to devalue in order to pay back in cheaper currency and encourage export growth (I think). Somehow the equivalent of this — if you don’t have your own currency — is supposed to be to cut wages.

How does cutting wages help pay back your country’s debts?

This is a big hangup to me as a big prolabor guy. I’m thinking America (not Europe) can get going again by paying people more — 15% of income having shifted from the bottom 90% who would definintely spend it to the top 3%, mostly top 1%, who wont spend it and have nothing healthy to invest it in given lack of demand in a recession (not to mention lack of demand from people who should have gotten the income in the first place!). I don’t like the idea of cutting European wages either

My answer after the jump.

Let’s do America. One way in which we could pay our debts is if the dollar declined in value. That should cause increased exports and reduced imports so we would run a trade surplus. If that surplus was greater than the amount we have to pay our foreign creditors minus the income on our foreign assets, we would have a current account surplus so our debt would shrink (we would have a capital account deficit).

Strange but true, the US current account deficit is simiilar to our trade deficit. Even though on paper we are huge debtors (biggest evar) our foreign assets pay a much higher rate of return than our debts to foreigners.

But if Ireland uses Euros so it can’t devalue. Or can it. What if all wages, prices and rents in ireland were cut in half ? The effect would be the same as if they still had Irish Punts which devalued 50% against the Euro — foreign goods and services would suddenly cost twice as much compared to Irish goods and services.

The balanced decline in wages and prices (including rents) is called an internal devaluation. In the real world, it is very slow and painful process.

Part of the trick was that, in the case of devaluation of the dollar (or punt) I assumed that both the prices of domestically made goods and nominal wages stayed the same. In the real world, firms by foreign made materials, so their costs (in dollars) increase. When discussing devaluation, I assumed that firms produce using only capital and labor so if wages, the price of the capital and the interest rate don’t change, then costs don’t change. Trade was modelled only as trade in finished goods.

So it is hard to say how prices should change in order to mimic the effects of a devaluation. Also economists often assume that prices automatically adjust to equal marginal cost (perfect competition — a clearly false assumption made for convenience) or a multiple of marginal costs (fixed markups again a clearly false assumptino made for convenience and often made by Krugman).

Given either of these comforting fantasies, the instruction “cut wages and prices to make everything change just as it would with a devaluation and no I don’t know how much the price of that banana should be cut” becomes “cut wages and prices will take care of themeselves.”

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Other Voices, Other Blegs

We try to pretend we’re not actually human sometimes. And sometimes we have to decide not to pretend.

Many of the Life Cycle Theory models for economics assume limited borrowing constraints: you can’t borrow more than you will make (present valued), but you can borrow on future earnings.

You can only do that for so long until the projections start shifting and you hit a constraint even in a perfect modelworld.

This isn’t a perfect world. Four people who have recently hit constraints: Diane, Roy, Gary, and Lance. That’s probably in reverse order of need at the moment: people came through well for Diane over the weekend, and Roy has a wide audience.

So hit Lance’s tip jar if you can only hit one.

But remember: one of the things that happened in NYC after 11 September 2001 is that people started giving blood. People who didn’t normally give were donating; the place I usually give at was suddenly booked.

You know what happened next. Blood, unlike money, isn’t fungible or transferable. Six months later, there were shortages again.

If you can’t hit the tip jars now, but have a windfall later and are thinking about paying it forward: go read their blogs, and be ready for the next time. They don’t do what we do, but life isn’t only economics.

In the midst of the recovery, we need to give chances to as many starfish as we can.

And if, by chance, you are one of those starfish who needs help right now, Gary’s post here may be useful.

Or if you know of someone else who is in dire straights, mention it in comments (or send me an e-mail) so it can be added to this post.

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Thinking about Performance

My aging Subaru had a problem a while back. Leak of transmission fluid; a seal or another failing, leading to steady dripping out. And with little need to open the hood, no gauge—or even an “idiot light”—on the dashboard, it dripped for quite a while. And then some.

The first repair—call it Quizzical Effort 1—refilled the fluid, but didn’t find the leak. So we started driving it again, but were a bit more alert for signs that it was doing things such as slipping out of gear or having trouble accelerating from a stop.

We took it to another, better shop for Quizzical Effort 2 (QE2). There they found the leak itself. We spent a bit more money, but the leak is gone and the transmission fluid stays where it belongs.

But it was without fluid for quite a while, and fluids go into other parts of the system, “priming the pump,” as it were, for better operation.

Can we say that my car has made a “recovery”?

The question keeps rearing its “ugly” head as the Jobless Recovery moves forward. Even the Optimists (Mark Thoma, Brad DeLong) are hesitating in the face of the evidence*; Thoma’s graphic at the link just previous notes that the current reovery is not just Jobless, it’s still Job-Reducing, while DeLong tries to dance a line between “this time is different, just like the last one” and “we’re going to turn this into Structural Unemployment Any Day Now” while still thinking of rainbows and kittens.

The strongest evidence that the Recovery has begun is the fiat that NBER declared the recovery to have begun. The second-strongest evidence is that there is noticeable growth in the economy** since the date chosen by NBER.

The following graph appears to support NBER’s declaration. But note the yellow area.

If you want to speak of Business Cycles—I don’t; I consider RBC Theory as its proponents describe it to be the silliness idea this side of phlogiston, but there are those who do, and it’s a convenient fiction for purposes here—then surely you should speak of a full Cycle.

The return to the level of Capacity Utilization at the end of the previous recession comes not as the recession ends, but four quarters later, a year into the “recovery.”***

And that’s just the Capital side of the equation. Labor is rather more complicated.

It is as if the machine is running again, but has not received a proper tune-up, or any other (“structural”) work that needs to return it to peak performance. As John Maudlin noted last May, employment rises with income, and income tax receipts were not rising with the “head-fake” recovery—”grass shoots—of that time.

My Subaru used to get around 17-18 mpg (city). Now it’s closer to 15-16. It would require an investment of capital and labor to get it completely repaired. Being liquidity-constrained, I’m not going to make that investment until a couple of other things are cleared up—including, but not limited to, the possibility of upgrading to a model built in this century.

Similarly, capital recovery is a slow process, and incremental labor tends to follow that in productive industries. The gap in capacity at the beginning of the “recovery” took 12-13 months to be filled. Given that it took 55 months for the Employment/Population Ratio to recover after the 2001 recession (or here), it seems not at all unreasonable to expect the current recovery to take 67 or 68 months.

Which would be around January or February of 2015, just after the midterm elections and therefore nearing the end of the first Palin Administration.

It would be rude of me to note that the first “non-recession” period of the Great Depression lasted only fifty (50) months. Or that there hasn’t been a period of growth so long without tax increases since the Vietnam War.

As with my Subaru, some major investment is needed. Whether there will be the liquidity for that to happen in time is left as an exercise.

*Both, in fairness, have declared the current “recovery” “fragile” (Thoma) or filled with “unforced errors,” but persist in calling it a recovery.

**Let us sidebar that much of that growth is in the FI part of FIRE. If you have assumed that the lion’s share of the profits generated by an economy should go to those who are supposed to intermediate, you have to deal with the structure you’ve got, not one that would produce better, or even optimal, growth.

***The monthly series (MCUMFN; not graphed) reaches and passes the start of the previous recovery in July of 2010. NBER official dates the end of the recession to June of 2009, where Capacity Utilization reached its nadir of 65.2. It is perfectly reasonable to say “a recovery” began then, but a “Business Cycle” that ends with nearly 7% of usable capital (a 9.6% decline in capital terms) sitting vestigial is a poor “Cycle” indeed.

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Why … we have a better press corps

What’s Brad DeLong always typing about ? We have a better press corps. It’s just that they all work for McClatchy. David Lightman shows how to report that someone is lying without using the word

The report says that a study by the National Federation of Independent Business, “the nation’s largest small business association, found that an employer mandate alone could lead to the elimination of 1.6 million jobs between 2009 and 2014, with 66 percent of those coming from small businesses.”


Michael Steel, a spokesman for House Speaker John Boehner, R-Ohio, said: “The (NFIB) report analyzes the effect of an individual mandate. Obama care includes an individual mandate. We make that clear in the report.”

(emphaisis mine)

So Mr Steel asserts that “employer mandate” means “individual mandate.” He is lying.

The whole article is worth reading (and discussed at length after the jump). Lightman proves at great length that the “19-page Jan. 6 report, “ObamaCare: A Budget-Busting, Job-Killing Health Care Law.”” is fundamentally fraudulent.

But what of the rest of the US press corps. If it is true, as I believe, that McClatchy has this reporting business under control, what are the rest of them to do ? I think they could usefully teach primary school — certainly they treat their readers and viewwers as children.

The subject of Steel’s blatant lie was this absurd assertion in the 19 page report

— The report says that a study by the National Federation of Independent Business, “the nation’s largest small business association, found that an employer mandate alone could lead to the elimination of 1.6 million jobs between 2009 and 2014, with 66 percent of those coming from small businesses.”

But that study was released on Jan. 28, 2009, well before the law was written. It studied a model, not the law that was enacted eventually, and it was based on a different set of assumptions.

“It’s old. We don’t use it anymore because it was based on a hypothetical mandate,” NFIB spokeswoman Stephanie Cathcart said. While her group still thinks that the law will hurt business job growth, it cites no firm number.

Oh my.


— The GOP report says: “Economic theory suggests the penalty should ultimately be passed through (as) lower wages (to an employee),” quoting a Congressional Research Service report.

But Republicans chop that sentence short; the CRS version goes on to say that the penalty for not offering coverage “would not be a burden on small business owners.”

Rather an important omission wouldn’t you say ?

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Prepping for the State of the Union address

By: Daniel J. Becker

With the state of the Union coming up and the current national attention having been drawn toward the question of the nation’s personality via reality mimicking Hollywood (God, that slap in the face hurt bad, assuming you felt it) I want to try to get us ready for the presentation by reminding people that drama can not be the end all and be all as motivation. We truly need to acknowledge the vastness between policy including policy statements and implementation and the living experience post policy.

Last year I posted my state of the union opinion based on real world small business experience.  Well, I can tell you, it’s not any better. I’ll get to that in the next post. Let’s just say, I got to experience the down side of the “stimulus” first hand. No, I’m not against stimulus, just poorly implemented stimulus.

In the mean time. There has been much discussion regarding the degree of leftyness of President Obama in the last 2 years. I asked in ’08: Obama, Is he or isn’t he….real?  In that post I drew on some statements President Obama made pre-election regarding policy positions. You should go read the comments. It’s kind of a “how wrong/correct were we” experience.

I want to focus on just one statement by President Obama from that post keeping in mind the concept of the “state of the union” address:

I will invest $150 billion over the next decade in renewable sources of energy to create five million new, green jobs – jobs that pay well and can’t be outsourced; jobs building solar panels and wind turbines and fuel- efficient cars;…

Great policy idea. Stimulus, jobs, hits the climate change thing, gives purpose and a direction for say our education system. Kind of lefty on the leftyness scale. However, there has always been rumblings that I’ve read and thought regarding greening our economy and jiving that with globalization and outsourcing. Well, we got our answer. It’s not jiving. Or should I say, it’s jiving just fine considering our current economic industrial policy?

Solar Panels Jobs Go to China

BEIJING — Aided by at least $43 million in assistance from the government of Massachusetts and an innovative solar energy technology, Evergreen Solar emerged in the last three years as the third-largest maker of solar panels in the United States.

But now the company is closing its main American factory, laying off the 800 workers by the end of March and shifting production to a joint venture with a Chinese company in central China. Evergreen cited the much higher government support available in China.

Even though Evergreen opened its Devens plant, with all new equipment, only in 2008, it began talks with Chinese companies in early 2009. In September 2010, the company opened its factory in Wuhan, China, and will now rely on that operation

Let the excuses begin. In the end, the reality of the state of the union is that it’s not good in all aspects of it’s health. As I asked in “Is he or isn’t he…real”

If the change we wanted was not to be bull shitted anymore, and the one I’m listening to is talking “change” using lingo, presenting policy plans of what I want, was I wrong to think they were talking no more bull shit?
Which brings us back to reality mimicking Hollywood. It is not just the issue of violent rhetoric. No, no, noooooooooooo.

Do you know what happens to a person when they can never get a straight, a no hidden agenda answer from the one(s) they count on? They go nuts.

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European policy…really?

This week Trichet laid down the ECB’s hand, (effectively) announcing his intention to maintain inflation at the ECB’s target rather than allow it to overshoot. For all intents and purposes, 2% inflation stabilizes the real exchange rate rather than furthering real depreciation in the Periphery and real appreciation in Germany (or the Core).

Ambrose Evans-Pritchard agrees with my interpretations of Trichet’s speech:

Mr Trichet’s fire-breathing rhetoric can be taken as a signal that the ECB will continue to run monetary policy for German needs and tastes, refusing to accommodate a little slippage on inflation to let Club Med regain lost competitiveness without having to endure the agony of debt-deflation. Indeed, the ECB seems to have picked up some of the worst habits of its mentor.

Only the rebalancing of inter-euro current accounts will bring stable fiscal finances for debtor and creditor countries alike, something made more difficult with 2% average inflation! Trichet, in an interview with German newspaper,, doesn’t acknowledge this fact (bolded by RW):

Let me be very clear: this is not a crisis of the euro. Rather, what we have is a crisis related to the public finances of a number of euro area countries. All governments have to put their finances in order, and above all those governments and countries which have lived well beyond their means in the past.

Really? On the aggregate, Euro zone economies ‘living well beyond their means’ are now doing so in two respects: the current account deficit and public deficits. They’re not the same. Don’t even start with the ‘twin deficit’ story – Rob Parenteau refuted that some time ago.

It’s not about government dissaving, per se. For countries like Spain, or any other Euro area economy with years of accumulated private sector leverage, the only way for the public sector to simultaneously reduce fiscal and private deficits is for Germany foreigners to dissave (foreigners run large CA deficits). (See a previous post of the 3-sector financial balances model here.)

Given the close trade ties in the Euro zone, growing income from abroad effectively means a transfer of saving from the Eurozone Core to the Periphery via the current. This requires real appreciation in Germany, for example, and real depreciation in Spain.

First, real appreciation/depreciation could have been given a fighting chance with a lapse of the inflation target. Trichet made it quite clear where the ECB stands on this front: NEIN.

Portugal, Greece, and Spain have essentially no chance if left to their own accord.

Spain along with other Periphery economies are relatively “closed” compared to the German export powerhouse; that needs to change.

The chart above illustrates the degree of openness across the Eurozone, as measured by (exports + imports) divided by GDP. Spain, Greece, Italy, and France (expected to run budget deficits the size of Spain this year) are the most ‘closed’ of the Euro area (16, not including Estonia). In Greece, Spain, and Italy, the GDP share of export income has decreased over the last decade; furthermore, it’s imports, rather than exports, that make the larger contribution to economic openness.

Export share
(Q3 2010)
Import share
(Q3 2010)
Greece 20.2 26
Spain 26.1 27.5
Italy 27.0 28.5

Even if Spain was more ‘open’, real appreciation is ingrained in the economy, as represented by unit labor costs. Structural reform is required on many fronts, private and public.

Since 2001, Spanish unit labor nearly doubled, +46%, while those in Germany grew just 17%. Recently, unit labor costs in Spain have stabilized. This is due to the contraction of the construction sector, which dragged productivity in recent years. Going forward, more is needed.

The EU made several recommendations in their 2010 Surveillance of Intra-Euro-Area Competitiveness and Imbalances (pg. 78):

Enhancing productivity in a more sustainable way would involve further investment in and enhancing the efficiency of expenditure in research, development and innovation, as well as improving the efficiency of R&D expenditure are crucial for achieving productivity advances. Further improvements of the education and life-long learning systems and investment in human capital should also be envisaged. This may be achieved inter alia, by ensuring the effective, implementation of widespread education reforms in addition to upgrading the skills and increasing mobility of the labour force to promote a swift transition into employment, and reducing segmentation in the labour market.

Nowhere does the report say that competitiveness should be achieved by getting public finances ‘in order’. In fact, I’d deduce from these comments that more, rather than less, government spending is needed.

Without > 2% inflation, these countries don’t stand a chance.

Rebecca Wilder

Appendix: Another measure of relative price competitiveness, the GDP deflator.

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Israel’s Big Bluff on Iran: You Just Have to Ignore Physics and Geography

Which though not stated so baldly is the clear conclusion of the following: Abdullah Toukan and Anthony Cordesman:
Study on a Possible Israeli Strike on Iran’s Nuclear Development.

The authors outline three different attack routes the Israelis could use, each having its own set of political and military problems, but the real missing piece is the refueling. Theoretically Israel might barely have the range to get its planes on target but not to recover them. In fact it appears that a successful raid would depend on refueling the planes on the way in and again on the way out. Which would not only require just about 2X Israel’s actual aerial refueling capacity, but would have those planes staging for hours and hours in either Turkish, U.S. controlled Iraqi, or Saudi Arabian air space. And while Turkey and the U.S. might not relish a one on one attack on the actual Israeli strike force, and perhaps Saudi Arabia wouldn’t even attempt it, it would be hard to plausibly ignore those Israeli KC-135s doing figure eights in your airspace waiting for those F-15s and F-16s on the way in AND on the way out.

And since someone is bound to bring them up, similar limits apply to an Eitan drone or Dolphin submarine led attack, Israel doesn’t have the combination of numbers, range, and deliverable payload to get the job done. Not without the active assistance of the U.S. at a minimum as to refueling and emergency air fields, but likely with actual strike assistance as well.

If any of our commenter/military aviators can point me to or supply themselves a convincing refutation of Toukan and Cordesman then I am certainly willing to reconsider, but on my reading it just can’t be done. Unless Israel bluffs the U.S. into doing it for them.

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